Competition is an important part of the market. Analysing the competition helps to determine the feasibility of a business model and to develop a strategy for positioning oneself on the market.
It is all based around one question: How is the customer need satisfied right now and how you can do better (faster, cheaper, more reliable, better customer service, more discreet, customized etc.)?
Importance for your Business Plan
The competition analysis is done to see how your competitors are doing business and to find the right strategy for your business. It also helps in convince potential investors. Additionally, it will help you to determine the chances of success of your product.
Use these questions as an orientation:
- Who are your competitors and how many are there?
- What strategies do they employ? Low prices, high quality, wide portfolio, special service?
- Who dominates the market? Why?
- What rates does your competition take?
- What differentiates your offer from that of your competitors? Does this difference affect the customer’s decision to buy?
- What is your goal? Do you want to dominate the market? Do you want to position yourself in a nice market? Will you use prices, quality or superior services to succeed on the market?
Important: Don’t overcomplicate things, when researching this. All these questions are supposed to give you a rough idea on how to approach this topic. Maybe it is enough if you invest three good metrics from a reliable source. Ask yourself what information you would want as an investor.
- You can get information from industry directories, as well as the websites and press releases of your competitors.
- Scouting the area is useful if you want to open a shop that relies on walk-in customers.
- Talking to customers and industry specialists will help you find the right strategy.
- Important: Your competition are not only those, who offer the same product/service as you. Don’t forget market players who satisfy your customer’s need with a different product. Example: It would be catastrophic for a railway company to only take other railway companies into account. Airlines, Buses and even car sellers are competitors for them.
- Don’t be afraid to drop names: Who dominates the market and who is your closest competitor.
- To get an idea, what other entrepreneurs wrote about their competitions, check out our business plan samples.